Let’s talk about budget planning for 2017…
The approaching end of 2016, and the beginning of 2017, is a great opportunity for entrepreneurs and business owners to look back and reflect upon the year that was, and the one that lies ahead. And while there may be many items to ponder about for 2017, one aspect of your business that needs great consideration is your new year’s budget.
Your budget is the road-map that will steer your business towards the goals you set out to achieve. Without a realistic budget, 2017 will likely not see you any closer to accomplishing business success. The good thing about preparing your budget is that you don’t need to be a financial guru or a math whiz to do it right.
Here are some tips and best practices worth considering:
Look back…before moving forward!
You need to start by finding out how you did against what you had planned for in 2016. Were there any major deviations? What can you do today to ensure your 2017 budgeting process is much more refined and more effective than the previous year?
A look back can:
- Tell you if you over-estimated sales
- Inform you if you’ve underestimated expenditure
- Help you re-focus on key segments of your enterprise
- Show you where your strengths and weaknesses lie in terms of estimating, cost control or monitoring and tracking
If you haven’t already done so, a year-end budget review is a great process to implement in order to learn from hindsight.
Have a business plan
Your year-end budget review will likely reveal a lot about what you’ve done right, and some of what you’ve done wrong. Take that information and use it to refine your business plans:
- Maybe a new product or service needs to be introduced?
- Perhaps another market segment needs exploring?
- Do you need to spend more on advertising or marketing?
- Or you may even find out that current plans need to be strengthened and expanded
Your 2017 budget should then be built to help support your 2017 business plan.
As a business owner or entrepreneur, it is your responsibility to be open and flexible in regards to how you plan and manage your business. When it comes to acting strategically, your next year’s budget can help you become nimble. Consider this:
- What if you need to hire additional staff quickly?
- If prices for input materials or services go up, will you be prepared?
- How low can you drop your rates if competitors try to under-cut you?
Unless you consider your response to these eventualities well in advance, you may not be able to respond quick enough when they do occur. The 2017 budget planning process is the ideal time for you to start building flexibility into your business strategy.
Continue looking back…periodically!
Lest you think the budgeting effort is a “Set it and forget it” process – think again!
As a business owner, you can’t afford to let too much time go by without revisiting your budget periodically throughout 2017. Ideally, it’s good to have a quarterly review; and if that’s not feasible, then at least a half-yearly one. When you start building your budget for 2017 today, you can be sure of some things that will transpire over the next 12 months, but can only estimate others.
By periodically reviewing your budget throughout the year, you’ll be able to revise and refine those estimates – either upwards or down – so that by this time next year you’ll have significantly achieved most, if not all, of your 2017 business objectives.
You don’t have to go at it alone!
It’s often a good idea to make budget preparation a team exercise. Most business owners have in-house accounting, marketing or production staff that can help you validate your budget. Seek inputs from your team where possible, because they’ll offer domain expertise that’ll keep your budget realistic.
In the event that you are a small business with limited staff, you should consider reviewing your budget with an external accountant, your banker or experts from other financial institutions. While they may not be intimately familiar with every aspect of your business, these professionals can provide critical inputs to the budget that’ll ground it in reality.
At the end of the day, the budget is no more than a plan; and like any planning process, it needs to be done well before you actually need to use it. If you haven’t yet started building your budget for 2017, you should commence now!
Managing a business using a budget is akin to a mariner navigating rough seas using high-tech sonar and radar equipment. You can see the hidden reefs and rocks well before you come upon them, and then correct your course to avoid a ship wreck.
If you start now, and follow the steps discussed here, your 2017 budget should be ready well in time for you to take full advantage of any opportunities that the New Year has to offer your business.